For landlords in London and beyond, a guaranteed rent scheme can seem like the perfect solution. It offers the promise of a fixed, consistent income with zero void periods, eliminating the stress and uncertainty that often come with traditional lettings. At Abel Living, we work with many property owners who are looking for exactly this kind of stability.
However, a crucial question often arises that many landlords overlook: do I need to inform my mortgage lender before entering into a guaranteed rent agreement? The short and professional answer is yes, it is highly advisable to do so to ensure you are not breaching the terms of your mortgage.
What Your Mortgage Agreement Says
Your mortgage agreement is a legally binding contract, and it almost certainly contains clauses that define how you are permitted to use your property. For residential mortgages – the most common type – the terms are usually very clear: the property is to be used as your primary residence and not for commercial or rental purposes.
A guaranteed rent scheme, while providing many benefits to you, is fundamentally a form of tenancy. Even though Abel Living becomes your tenant, your property is still being let out. This action can put you in a position of breaching your mortgage terms if your lender is not aware and has not given you their consent.
The Difference Between a Residential and Buy-to-Let Mortgage
Understanding the distinction between these two types of mortgages is key. A residential mortgage is for a property you intend to live in, and it comes with specific terms and a typically lower interest rate. A buy-to-let mortgage, on the other hand, is specifically for properties that are being let out to tenants. Lenders see buy-to-let properties as a different risk category and often charge a higher interest rate and require a larger deposit.
When you join a guaranteed rent scheme, your property transitions from a primary residence to an investment property. Failing to inform your lender of this change could have serious consequences. If your lender finds out that you are letting the property without permission, they may impose a penalty fee, increase your interest rate to a buy-to-let equivalent, or, in the most severe cases, demand that you pay off the entire mortgage balance immediately. This could put your property and financial stability at significant risk.
The Safe and Simple Approach
The good news is that this is usually a straightforward issue to resolve. The professional and correct course of action is to contact your mortgage lender as soon as you consider joining a guaranteed rent scheme. You should ask them for a “Consent to Let” letter. Most lenders will grant this for a small administration fee and may make a slight adjustment to your interest rate.
This process legitimises your arrangement and ensures you are fully compliant with your mortgage terms, giving you complete peace of mind. While it might seem like a small detail, it is a crucial step that demonstrates responsible property management.
Your Professional Partner in Property
Navigating the complexities of property management and mortgage agreements can be overwhelming. This is where Abel Living’s expertise becomes invaluable. We pride ourselves on being more than just a guaranteed rent provider.
We are your professional partners, guiding you through every stage of the process, including advising on important financial and legal considerations. Our goal is to make the entire experience of letting your property as secure and stress-free as possible.
Guaranteed Rent Scheme Specialists in London
If you’re ready to find out whether a Guaranteed Rent Agreement is the right solution for you and your London rental properties, speak to the team at Abel Living. Call us today on 020 3924 4001 to arrange a free, no-obligation consultation, or send us an email to have someone call you back.